I have posted about Crash Proof- by Peter Schiff on my blog and I included it as the feature book in my ezine about a month back. I bought the book on a Thursday or Friday and finished it by Sunday. It is a great read and it took me back to thoughts I had in college, thoughts I had as a child and occasionally thoughts I have now when I stop and THINK.
In college I loved macroeconomics. I didn’t quite understand the Keynesian theories we studied. I don’t even remember studying other schools of thought like the Austrian School of economics. I just remember the equation to calculate GDP. We never focused on the savings factor in the GDP equation. We just focused on consumer spending and government spending. We didn’t talk much about exports since the US has been a net importer for years. We just discussed how government spending (printing money out of thin air) and consumer spending (debt) could grease the economic engine.
As a child growing up I thought that something needed to be made or manufactured before there would be jobs. A physical good. I thought to myself everybody can’t be doctors, lawyers and accountants. Today I find myself thinking everyone can’t operate a service business. Humanity has basic needs like food, shelter and clothing. Those three necessities are very recession proof things. Maybe that’s why when things get a little scary everyone flocks to natural resource stocks, commodities, precious metals and energy stocks. The rest of the economy is based on want rather than need.
A couple years ago I used to drive around and think man, there is no way people are going to keep buying all these houses or leasing these commercials properties. It just can’t continue. We have overextended ourselves. My family is as guilty as any other, and it’s even worse since I had the intuition that the party couldn’t continue way back when. Now that we know low artificial interest rates are caused by our fed’s tampering with the money supply, and that all the people who bought huge houses with arm’s and sub prime loans are no longer buying homes; the market has a glut of homes and vacant lots.
Crash Proof confirmed the common sense thoughts I’ve always had. With someone like Peter Schiff shooting straight with me, I took the following thoughts away from the book.
- Our government and federal reserve are inflating goods and services by printing money out of thin air.
- Our money is fiat money- meaning it’s not backed by silver or gold.
- When more money chases the same amount of goods we get inflation.
- When we get inflation and hyper inflation the value of our dollar collapses.
- Inflation is really inflation now is it? The inflation numbers we’re fed don’t include gas and food and might not include rents in the future. That way inflation is always 3-4%.
- Other investments like gold and foreign stocks are good alternatives for this perfect storm.
- When buying stocks good value oriented dividend paying foreign stocks are a good place to invest with a devalued dollar and a banking system that lacks confidence. What good is a dollar if it takes a wheel barrel full to buy milk? What good is a dollar if no body believes a dollar is worth any more than the paper it’s printed on?
- Getting out of debt as a individual is the next best thing to our country getting out of debt.
- If we don’t stop this madness, then foreign investors will stop taking our IOU’s and start buying up all of our goods- causing hyperinflation.
- If we lose confidence in our fractional banking system- we could also experience deflation.
- The longer we put off this recession or depression the worse it will be when it happens.
- If you stomach the tough times we can come out again as a powerful creditor nation that produces and saves. A country that relies on it’s own natural resources.
I’m not an economist, an investor, an investment advisor or a legal expert. This is a book review and I hope most of the summary points are accurate. Forgive me if anything is lost in translation.
I just wanted to promote this book, because I believe it is a must read.
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